Stefan Ried's Blog

Oracle’s keynotes and salesforce.com’s presentation next door have never been more confusing and contradictory for large users than they were today. Larry Ellison gave the 41,000 attendants of this year’s OpenWorld a cloud computing 101 session prior to the launch of the new EXALOGIC appliance, a machine engineered to run the Oracle Fusion Middleware stack very efficiently. After he rejected talking about the cloud for years, he swung over to the opposite end of the spectrum. Even though EXALOGIC is mainly aimed, in its first version, at private data centers, Larry simply renamed the virtualized data centers as private clouds and promised customers that they will get an elastic cloud with the help of the EXALOGIC box.

On the other side, salesforce.com’s Marc Benioff called every server on premise the “false cloud,” basically implying that something like a private cloud is simply a stupidity in itself.

Who is right or wrong in this debate? Is Larry simply doing cloud-washing at its best, or is Marc running a “false marketing” campaign, calling everything except his own cloud the “false cloud”?

Let’s understand how Forrester believes a private cloud differentiates itself from a traditional but modern and virtualized data center:

You see that the virtualization technology is a continuous evolution, but the big disruption from the virtualized data center into a private cloud is the business model. If the CIO fundamentally changes the way he or she runs IT and starts offering a pure OPEX model to the business units, we should talk about a cloud. In most cases, this is provided out of private cloud resources combined with public cloud resources in a hybrid approach. Obviously, the CIO needs to run a profit center to be able to take the risk of fluctuating utilization, potentially reselling public resources instead of the company's own resources dynamically. By far, most CIOs are not ready for a private cloud – although some are!

Coming back to Larry and Marc: I believe Oracle’s new EXALOGIC is an excellent machine to consolidate workloads and offer the scalability required for a private cloud. The Enterprise Manager and Oracle’s new Assembly Builder definitely help to achieve the level of industrialization CIOs need to compete with public provider offerings. But, at the end of the day, EXALOGIC is simply a machine with well-tailored software on it. It’s up to the CIO to engage in a cloud business model or to simply run a high-performance data center. In this respect, Oracle and its partners need to carefully explain usage scenarios instead of rolling out a cloud-washing campaign.

Finally, Marc should appreciate that there are other large-scale data centers on this planet – some are operated by hosting providers and outsourcing firms – some are very successfully run by very large global corporations – some are of the size of your data centers. Marc, with all respect, the more you talk about the "false cloud," the less these very large firms will continue to appreciate your strategy.

Please leave a comment to let us know if you believe in a private cloud and how you are building it.

Comments

You are spot on. Larry is quite upset, despite acquiring large on-premise software companies, that his dream of becoming a largest software vendor is not coming sooner with all the disruption cloud / SaaS is bringing to the table. While Oracle was busy integrating all the stuff they bought - the market has moved on. Larry is feeling unfair - like a blanket pulled off his feet.

I was arguing with a colleague that Larry is buying more time by spreading negative message on cloud - so that Oracle can come to a level playing field to compete in the cloud market. The moment they see that they are getting (even with something as remote as EXALOGIC) their pitch seems to swing to the other end! NO surprise!

I'd like to understand how Forrester believes IT turns into a Profit Center? Who are they selling services to? External or Internal customers? Also, How will an IT org be able to get enough CAPEX funding to provision enough private cloud infrastructure to handle peak usage? Only a very few large enterprises can create the private cloud model explained here and even they are looking to "real" Cloud solutions to simplify their life.

Hi Ali,
thanks for leaving a comment. Yes, you are right, private cloud business models are simply not working if you have not a big economy of scale. Imagine you have a virtualized data center with some capacity. If load increases you might swap some VMs out to an public provider like Amazon. So the CIO is suddenly reselling public resources into the business unit. On the other hand, if you have situations where you have a lot over capacity, you might start selling this to others. Frankly this is still a huge challenge in terms of privacy and security, but EXALOGIC 1.1 is coming close to this.
You see that the CIO has multiple spending and income option along the elasticity of the load. Does this make sense?

An interesting discussion point I have not read elsewhere, selling spare capacity outside the corporation, as well as buying capacity from others during peaks.

Could this lead to arbitrage situation, not to mention, would CIOs end up hiring a bunch of clever kids to open their own trading floors, could lead to a complete nightmare for the CFO. And of course, the economies of scale got to be the winner.

What if unit cost of private cloud still higher than the unit cost of the real cloud? Maths might not worked out!

this is a CFO nightmare, sure. But, look how amazon originally started. Now the retail store's IT load is much smaller that their AWS business.
There are some countries like Germany with a millions of solar panels on private homes, all providing electricity back into the grid, if not needed in the own house. Cloud is real if it moves in the direction of these utility models.
No question security, privacy, data movement need to be fixed, but it took sub-continents also some decades to agree on one voltage and frequency for the power grid. Let's give the private cloud 5 years to mature...

I. Providing only own resources in an opex model to the business units.
II. Extending own resources with (virtual) public resources.
III. Selling over capacity into a cloud broker or to other companies directly.

Interesting post. I would tend to agree with your characterization of the private cloud. One thing that I've seen during my travels is the "hotch-potch" nature of the components "under the hood" of emerging cloud infrastructure solutions. As an example, their seems to be a bias towards using REST as a protocol for the self-service portal aspect which in turn faces an impedence mismatch when requests are passed through to provisioning engines such as BMC AO.